Cut Tourism VAT

The Treasury is Taking our Campaign Seriously!

 

Dear Supporter

Thank you for your declaration of support for the Campaign. This Update reports on the Campaign’s significant recent progress. If you have not declared your support and would like to do so – read on!

Winning the economic argument
As reported in previous updates, we presented our case last year to Treasury officials who suggested that the impact of reduced tourism VAT be analysed using a Computable General Equilibrium (CGE) model. They provided the name of Professor Adam Blake of Bournemouth University who built and maintains a CGE model owned by the Government and gave permission for him to use the model on behalf of the Campaign. This is believed to be the first occasion on which the model has been used in this way.
A report setting out Professor Blake's analysis was submitted on 31st August 2012 and a further meeting with HMT officials was held on 18th September 2012. Key findings of the analysis are that tourism works in a different way to other sectors in the CGE model for two reasons in particular:

  • Firstly, reducing the price of UK tourism (through the VAT cut) will encourage weekend breaks and days out, entice some UK residents to switch from foreign to domestic holidays and encourage more visits to the UK from overseas residents, thereby increasing UK ‘exports’; and
  • Secondly, a high proportion of the jobs created will be taken by young people and part-time workers, many of whom may be new to the workforce and with limited alternative employment opportunities.

Based on reasonably plausible assumptions, the modelling seems to support a general case that a reduction of VAT on tourism services would be fairly close to fiscal neutrality and the UK will benefit from substantially higher GDP gains, peaking at £4 billion per year.
Professor Blake compared the results of reduced tourism VAT rates to other measures being considered by the Government to stimulate growth, such as:

  • A 2p reduction in the standard rate of corporation tax
  • A 20% reduction in rates for employers’ national insurance contributions
  • A 1p reduction in the standard VAT rate

Professor Blake’s conclusion from the CGE analysis is that cutting tourism VAT is “one of the most efficient, if not the most efficient, means of generating GDP gains at low cost to the exchequer that we have seen with the CGE model”.

Treasury officials are now reviewing our report and supplementary information provided to them and preparing a briefing paper to present to ministers.

Winning the political argument
Our grassroots campaign is aimed at demonstrating to every UK MP that reduced VAT on tourism will bring jobs and growth to their local constituency. Many of you have been supporting this initiative and we are very grateful for your support.  Indeed, the number of our supporters is growing every day.  We now have a list of over 350 companies, associations, organisations and individuals who are adding their weight to the Campaign and supporting its objectives. The full list can be accessed on www.cuttourismvat.co.uk.

We have now produced a VAT Factsheet which provides a short but comprehensive summary of our arguments for a cut in tourist VAT to 5%.  This can be presented to MPs and other interested parties and copies can be obtained from our website - www.cuttourismvat.co.uk.

In March this year, the Campaign published an open letter to the Chancellor of the Exchequer which set out in brief our aims and objectives. We received a response in August and are writing to him again to highlight our latest research. We will be writing to the Chancellor of the Exchequer again ahead of the Autumn Statement. Copies of this correspondence  are or will shortly be available on our website www.cuttourismvat.co.uk.

All-Party Political Tourism Group (APPTG)
The Campaign is hosting a launch of our latest research to MPs who are members of the APPTG at 4.00 p.m. on Tuesday 4th December in Committee Room 20 of the House of Commons. Please contact us if you are interested in attending.

What would you do if VAT were cut to 5%?
At the end of last year, Supporters helped the Campaign by completing a short survey aimed at finding out what you would do if VAT were cut to 5% on visitor accommodation, attractions and restaurants. The results provided valuable information for our discussions with the Treasury. The main findings were presented in Campaign Update No 2. Highlights were:

  • Nearly 98% of respondents said that the current VAT rate hindered the competitiveness of the UK tourism industry
  • Three-quarters believed it would lead to more domestic visitors while over half thought a reduction would lead to more overseas visitors. 
  • over 25 per cent said that if a five per cent VAT rate were achieved all of it would be passed on while a further 70 per cent said they would pass some of it on.  Of the latter, 82 per cent said they would invest more in their product/facilities, 67 per cent would employ more people, 57 per cent would invest more in training and just under half (48 per cent) would increase staff wages.

We will be repeating this survey to form the basis for further negotiations with the Government. We will be sending it to you a few days after this Update. Do please look out for it and reply – it takes only 5 minutes or so.

What we are campaigning for
Our primary argument for a reduction is based on the fact that most countries in the EU have reduced rates of VAT on tourism whereas the UK applies the standard rate, making our tourism industry seriously uncompetitive. The UK is one of only four countries of the 27 in the EU which does not have a reduced rate of VAT on visitor accommodation. And we are in a minority that does not apply a reduced rate for visitor attractions. About half do for restaurants.

A reduction in VAT would lead to lower prices, would encourage British residents to holiday at home rather than going overseas, and would increase the number of foreign visitors. Some of the VAT reduction would be used for investment and for training and increased wages, thereby improving quality standards. All of this will lead to a virtuous cycle of increased demand, quality and employment.

We want the Government to reduce the VAT rate for visitor accommodation and attractions to 5%, which is the UK's only reduced rate at present. We are also committed thereafter to achieving a reduced rate for restaurants. This staged approach recognises the fact that in the present economic climate the cost to the Treasury of applying reduced VAT on out-of-home meals is politically unacceptable, whereas reducing VAT on visitor accommodation and attractions creates jobs AND produces a financial benefit for the Treasury. So we want the Government to do this first and see the benefits; then we will lobby hard for the VAT reduction to be extended to restaurants.

Who is behind the Campaign
The Campaign is led by four organisations that have invested heavily over a number of years:

  • Merlin Entertainments Group, the UK’s largest operator of attractions
  • Bourne Leisure Group, the UK’s largest operator of holiday accommodation
  • BHA; and
  • BALPPA (the British Association of Leisure Parks Piers and Attractions).


The Campaign is supported by over 350 businesses, trade associations and others that have actively declared their support for the Campaign. A list of current supporters is on the Campaign website: www.cuttourismvat.co.uk . If your business or organisation is not listed and you would like to support the Campaign, do please send an email to support@cuttourismvat.co.uk. If your business has been listed in error or you no longer wish to be listed as a supporter, please let us know.

What you can do
The Campaign is seeking volunteers to approach their local MP, councillors and media to impress upon them the merits of our arguments so that we can build up a grassroots message in our approach to government.
Many supporters attended our briefing session where we took you through the tool kit as well as explaining our objectives and how we aim to achieve them. If you missed this, you will be able to view on our website the toolkit which gives a step-by-step guide on how to engage with political and media audiences in your campaigning, and answers many the questions that might arise along the way –contact us for further information.
Your support for the Campaign – and that of others – will be a significant factor in achieving our objectives, to the benefit of the entire industry.  I urge you to register your support by e-mailing support@cuttourismvat.co.uk.

Thank you for your continuing support!

Graham Wason, Chairman, Campaign for Reduced Tourism VAT

British Hospitality Association Queens House
55-56 Lincoln's Inn Fields
London WC2A 3BH
Tel: +44 (0)207 404 7744
Fax: +44 (0)207 404 7799
Email: bha@bha.org.uk
Web: www.bha.org.uk
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